Business broker vs M&A advisor vs investment banker
3 titles, 3 different jobs, 1 question: how big is the company.
The words are used interchangeably by people selling the services and they are not interchangeable. A business broker, an M&A advisor and an investment banker run different processes, for different sized companies, paid different ways, under different rules. Picking the wrong 1 costs an owner either a large fee for a process the business did not need, or a small fee for a process that leaves money on the table.
The short answer
Size decides it.
Then the buyer type, then the fee.
Under roughly $2,000,000 in value, a business broker: the buyer is usually an individual with an SBA loan, the process is a listing, and the fee is a percentage of the price. From roughly $2,000,000 to $50,000,000, an M&A advisor: the buyers are strategic acquirers and private equity, the process is a confidential auction with a memorandum, management meetings and letters of intent, and the fee is a success fee with a retainer credited against it. Above that, an investment bank: the same process with a larger team, a broader field, securities licensing, and fees that start in the low single digits of the price.
Citadel Ridge runs sell side representation as an M&A process for businesses commonly between $2,000,000 and $50,000,000 in enterprise value, and delivers it through the fixed fee Exit Engagement for owners at $10,000,000 or more in gross revenue. It is not an investment bank and not a broker dealer, and it says so.
Side by side
Where they actually differ.
| Business broker | M&A advisor | Investment banker | |
|---|---|---|---|
| Company size | Under roughly $2,000,000 in value | Roughly $2,000,000 to $50,000,000 | Roughly $50,000,000 and up |
| Typical buyer | An individual, often with SBA financing | Strategic acquirers, private equity, family offices | Strategic acquirers, private equity, public companies |
| The process | A listing on marketplaces, a brief profile, buyer inquiries screened | Confidential auction: blind teaser, NDA, memorandum, management meetings, competing letters of intent | The same, with a larger team, international reach and financing capability |
| Materials | A listing and a summary | Confidential information memorandum, adjusted earnings schedule, data room | The same, plus fairness opinions and financing where needed |
| How they are paid | Commission, commonly 8% to 12% of price, sometimes on a declining scale | Success fee commonly 3% to 8% on a declining scale, plus a retainer credited against it; or a fixed fee | Success fee commonly 1% to 3%, retainer, minimum fees in the hundreds of thousands |
| Regulation | State real estate or business broker licensing in some states; no securities registration for asset sales | Varies; stock sales of private companies may require securities registration or an exemption; many advisors work through a broker dealer | FINRA member broker dealer, registered representatives |
| Time to close | 6 to 12 months, often longer | 7 to 10 months on a prepared business | 6 to 9 months |
| Fits when | A main street business an individual can run and finance | A company with earnings a financial buyer will pay a multiple for | Scale that justifies the minimum fee and a buyer field that is institutional |
General descriptions of how the market commonly divides. Bands overlap, fees are negotiated, and regulation depends on the structure of the specific transaction and the state. Not legal advice and not an offer.
How to choose
5 questions to ask all 3.
The answers sort them faster than the titles do.
1. How many buyers will see this, and how will you find them? A listing is not a buyer field. Ask to see how the field is built and how many strategic and financial buyers were contacted on the last 3 engagements.
2. Will you tell me what it is worth before I sign, in writing? A range with its basis, before an engagement letter. If the number arrives after the exclusivity, it was not a valuation.
3. Exactly how are you paid, and what is the minimum? Commission, success fee, retainer, fixed fee, minimum. In a sentence, before you sign. On the Exit Engagement it is a fixed fee in a single mandate document, and the firm's compensation page says so.
4. What is the structure of the sale, and are you permitted to run it? Asset sale or stock sale changes the tax and can change who is legally permitted to arrange it. Ask, and confirm the answer with counsel.
5. What happens if you think I should not sell? The honest answer exists. A business that cannot yet command the price the owner needs is better served by 12 months of preparation than by a process that ends in a low letter of intent, and an advisor should say so.
Questions
What owners ask.
Can I sell my business without any of them?
Yes, and some owners do, usually to a competitor or a manager who was already at the table. What you give up is competition. A single buyer who knows they are the only 1 prices accordingly, and the difference between 1 offer and 5 is routinely larger than any fee.
What is a success fee on a declining scale?
A percentage that falls as the price rises: for example 5% on the first $5,000,000, 4% on the next $5,000,000, 3% above that. Common in the M&A advisory band. Ask for the schedule, and check whether it is charged on enterprise value or on cash at closing.
Why does an investment bank have a minimum fee?
Because the process costs the same to run on a $30,000,000 company as on a $300,000,000 one and the bank staffs it the same way. The minimum is why banks decline businesses below their band, and why the M&A advisory band exists.
What does Citadel Ridge do on a sale?
Runs the M&A process: valuation range, adjusted earnings schedule, confidential memorandum and data room, a buyer field built for the business, management meetings, competing letters of intent compared on cash at closing and ability to close, and negotiation through closing alongside your counsel and CPA. The business sale page covers the process and the timeline.
Start with the file
A straight read within 2 business days.
Send the basics through the intake form: what the file supports, what is missing, and the next step if there is one. If we are not the right desk for it, we say so.